RICO Act -- 2003



PacifiCare Health Systems, Inc. v. Book   (U.S. Supreme Court)

Enforceability of arbitration clause

Finding the issue not yet ripe for review, the Supreme Court refused on 4/7/03 to determine whether parties could be compelled to arbitrate RICO claims even if the relevant arbitration provisions prohibited recovery of "punitive" or "extracontractual" damages (ostensibly affording claimants less than "meaningful relief" given that their RICO treble damages claims would therefore be barred). In particular, the Court found the arbitration provisions to be ambiguous in light of the Court’s prior characterization of RICO treble damages claims as remedial in nature. Because the parties did not appear to expect initial resolution of this contractual ambiguity by the courts and it was unclear how the arbitrator would interpret the relevant provisions, the Court reversed the lower courts’ refusal to grant the motion to compel arbitration. The eventual outcome of this case is important to any business which includes in its agreement mandatory arbitration provisions that bar the recovery of punitive damages.

The NAM filed an amicus brief supporting the enforceability of the arbitration clause.